The New York Times says that the mortgage meltdown isn’t just a subprime problem anymore, but has spread into the prime market where consumers with good credit are now struggling to pay their bills.
Plummeting home values are sticking home owners with properties that they refinanced with the intention of selling before their rates jumped. Now they’re trapped in homes they can’t afford and also can not sell for more than they owe.
Here’s an example from the Times:
An example of the spreading credit crisis is seen in Don Doyle, a computer engineer at Lockheed Martin who makes a six-figure income and had a stellar credit score in 2004, when he refinanced his home in Northern California to take cash out to pay for his daughter’s college tuition.
Mr. Doyle, 52, is now worried that he will have to file for bankruptcy, because he cannot afford to make the higher variable payments on his mortgage, and he cannot sell his home for more than his $740,000 mortgage.
“The whole plan was to get out” before his rate reset, he said. “Now I am caught. I can’t sell my house. I’m having a hard time refinancing. I’ve avoided bankruptcy for months trying to pull this out of my savings.”
The article also provides some troubling statistics about auto loans and HELOCs, both of which are seeing increasing amounts of loans in default.
It seems that the heady days of homeowners who were happy to pay huge monthly payments into their “investment” are over:
In a conference call with analysts in December, Kenneth Lewis, the chief executive of Bank of America, said more borrowers appear to be giving up on their homes as prices fall, noting a “change in social attitudes toward default.”“You don’t mind making a $2,000 payment when the house is going up” in value, said Steve Walsh, a mortgage broker in Scottsdale, Arizona, who has seen several clients walk away from their homes because they couldn’t refinance or sell. “When it’s going down, it becomes a weight around your neck, it becomes an anchor.”
Mortgage Crisis Spreads Past Subprime Loans [NYT]
(Photo:MeghannMarco)
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I love the folks that keep saying this isn’t real, that we are just imagining this.
@dirk1965:
Link please.
A house is an investment (and remember, investments don’t always go up, past performance is not indicitave of futre returns, etc).
But it must be treated as an investment to truly an investment. It should not be treated as an ATM.
That’s not to say that all home equity loans are bad. If you are in a stable market, and have 50% equity on your home, maybe taking out $10-$15K to remodel your kitchen (like re-investing your dividends) isn’t a bad idea. Taking out equity to pay for college, is. College is overpriced anyway.
I bought a home in Michigan in 2001 for $140K. I took a relocation last year and managed to sell it for $143K. Pretty bad returns. But I put 10% down when I bought it, and came out with about 30% (of the original amount) when I sold it. Sure, I paid some interest… but if you compare all of what I paid on it in interest, took away my profits, and compared it to paying rent for a similar size roof over my head, I came out pretty good vs. renting.
When you consider where to live, and decide to live in California, you need to consider the housing market our there before you decide to “invest” in a home.
People made a bet and lost. I have no patience for people who bought into the whole “houses as investment” scheme. They were adults when they made the decision to get into that racket, and they’re directly responsible for the fact that normal working families can’t afford to buy houses to live in anymore without getting into ridiculous amounts of debt. So, tough. These people fancy themselves investors when in fact all they did was buy high and are stuck with investments they can’t sell.
Not that I feel sorry for the banks either. Both the banks and the now-troubled buyers were driven by greed, and it’s that drive that’s biting them hard now.
I don’t know how on earth anyone thought that housing prices would just keep going up the way they were… seriously. The whole market had been poised to crash- and it did and is.
The problem is Greed and no accountability. Home loans get resold numerous times these days. The person or bank that qualified you for that loan and got it for you turned around the next day and sold that paper to another company and got paid. They made their money and are gone. You owe money to someone who never did any due dilligence on your ability to pay it back. The owner saw dollar signs because of the housing bubble, the brokers and banks saw dollar signs on their fat commision checks. EVERYONE had their hand in the pot for this mess. To try to single out banks or individuals as the true bad guy in this mess is just silly. An unregulated market was replete with theifs. Some people fell for it and got burned, some people joined in and made a profit. As usual the commenters on the The Consumerist think they are smarter then everyone.
Somehow we have forgotten the old country adage of “pigs get fat, hogs get slaughtered” This country needs more bacon!
@hi: Are you brand-new to this earth? Banks stopped caring about clients’ ability to repay loans when they started to be able to turn around and sell those loans as mortgage-backed securities to any number of firms. All of those firms were in a feeding frenzy over the last few years, which led banks to jump on board as hard and fast as they could to make money while the money was there to be made.
What’s to blame is lax regulation of this whole process, and yes, lax oversight of NINJA loans and income-onlies.
But if you seriously think the bank is going to do due diligence in this regulatory climate, you’ve got another thing coming. It’s better to evaluate your ability to pay for a house the old-fashioned way (by doing a budget and figuring percentage of income) than by going with how much of a mortgage you’re approved for.
P.S. The guy in the story above makes me fear for our national security. 6-figure job at LM and he hadn’t saved any money for his daughter’s education? These are the type of people working on defense?! My parents put 3 kids through school with savings, and they didn’t make 6 figs combined. (And own their house free and clear, don’t have debt, don’t live beyond their means, etc). Man, I hate, like, everyone now.
Two rules: 1) don’t ask if you can afford to make the current payment, Ask if you can afford to make the payment on the loan when the rates go up as high as they can go. 2) Leave equity in your house.
Follow those two rules, and you won’t end up like this guy. Hell, follow just one of those two rules and you won’t end up like this guy.
They used to insist on 20% down when you bought a house. Part of the reason for this is that it is a cushion for if and when the housing price drops. People seem to have forgotten this and see no risk at owing $740k on a house worth $740k.
@hi: Banks had to deal with the middleman–the mortgage broker or financier–they were the ones who put the deal together and found the financing from the banks–the middleman (woman) was the one who put the “fraudulent” paper work together and often inflated applicant’s income. Some brokers did offer their own financing but would immediately sell the loan to a bank–but the loan was already a done deal.
What used to be when you wanted a home loan you’d go to your local bank/credit union to apply inside for a loan. What happened was people went to an independent broker or small company who then would “shop” around the loan to all of the banks (hence, better for the consumer right? ha!) to get the best deal. These brokers knew to qualify for a bank loan that some applicants(not all) but enough needed to pad their incomes.
I know cause I know someone who went through the “stated income” home loan first hand. It’s not just stated income, you have to show you have X amount in the bank (usually 3-5 times the mortgage payment). In my friend’s case, he had to show he had around 10K in the bank (3x’s his mortgage payment). Well, he only had 5K so he “borrowed” 5K from a family member. Easy.
“The whole plan was to get out” before his rate reset, he said. “Now I am caught. I can’t sell my house. I’m having a hard time refinancing. I’ve avoided bankruptcy for months trying to pull this out of my savings.”
That’s a sorry excuse for a plan, and I don’t know why anyone would have sympathy for someone in this situation. Neglecting the obvious cases of fraud and deception there are going to be many prime mortgage defaults coming up when people weigh the cost of draining their entire savings vs defaulting. Right now I’m sure there are many just staying afloat while watching their savings deteriorate who will eventually hit bottom in the next 3,6,9 months. This has nothing to do with predatory lending, it has to do with greed and shortsightedness.
How, after all this sub-prime crisis and flap, do websites still have those shitty ads with an animated, dancing slut or a stoned alien telling you to refinance your $300k house for $965 a month?
Anybody who works for Lockheed below the executive level and took out a mortgage on a $750K home is living beyond their means. Period, dot.
Don Doyle from Lockheed Martin is an idiot. I guess he never heard
of Federal loans, grants and private student loans to put his daughter
through college. Or maybe it was easier to use his home equity as an
ATM. This article pisses me off.
@clevershark:
“People made a bet and lost”
I would respectfully disagree with you. The lenders made a bet and lost.They drank the “prices will just keep on rising” Kool-Aid just as much as the borrowers did. They basically sold the no equity, 100% (and more) financing buyers an option. The option guaranteed that if the house did keep going up in value , the “buyer” could refinance their way out of the bad loan product that the lender sold them. The lender got his money back and collected the fees from writing and packaging the loan.As long as their was enough liquidity in the system to keep robbing Peter to tighten up Paul,everybody was happy.
The other side of that option is what we have now- the collateral isn’t worth the loan value and some buyers are making the perfectly rational decision to mail the kays back to the lender because they can’t make the higher payment when the loan resets. (I didn’t say moral -that’s another argument)They have no equity in the home,so the decision is easy.The lenders didn’t price that option correctly to take into account a lot of risks and now they’re boned in the ear and as you may have noticed,they are raising fees and charges left and right on people that can pay them on their other services. This is a tax that we all seem to be paying for the whole sorry mess…
@dirk1965: ok, so everyone agrees that these people were greedy and basically got what they deserved – that much is clear. but why is everyone against the government doing something about it?
2/3 of our economy is consumer spending. because the average person’s largest investment has lost a huge chunk of value, and they can no longer justify spending $250 a week on crap at Target, now everyone (even you and me, the ones who weren’t greedy, and didn’t make a stupid investment) are feeling the affects. inflation is rising fast, credit is not as easy to get, and home loans are even more difficult to qualify for as a first time homebuyer.
so no, i don’t think the government should bail out the homeowners. but i don’t think they ever intended to write off the loans completely. what they have proposed so far (freezing rates for 30 days)seems to be a good start.
unless you have money invested in the banks who are losing out on the frozen interest rates, or you love seeing families who live in their cars, there really doesn’t seem to be a downside to helping homeowners.
@yesteryear: The downside is that those who are responsible and live within their means will end up footing the bill while those who are living it up get another free pass.
I too am growing very weary of all this reporting. It seems obvious to me that the responsibility falls BOTH with lenders AND consumers. The bottom line is GREED, and a major problem was/is the thinking that values will continue to escalate. Stupid me, I always thought of my home first and foremost as a place to LIVE, not an income-generator. I’m just having a lot of difficulty mustering any sympathy because the bottom line is that these consumers got themselves into trouble biting off more than they could chew.
I don’t care that the mortgage brokers/realtors/banks are cheats and liars-this should be obvious to anyone with just a modicum of common sense and is no excuse-the responsibility for one’s financial well-being lies solely with the INDIVIDUAL. We bought in 2004; were approved for TWICE what we actually financed-we knew the difference between what we could actually afford vs. what we were offered and made the RESPONSIBLE choice. Sure, it would have been nice to have gotten “more” house, but the peace of mind knowing that our ownership is secure far outweighs the benefits of a bigger/fancier house, and having a good amount of disposable income is great too. All these people I’m reading about in these alarmist news stories COULD have made the same decision I did, and possibly would not be in trouble now. I have no sympathy-people need to start taking ownership of their lives and well-being (financial and otherwise) and deal with the consequences of their own bad decisions (regardless of how unpleasant)-it should be noted (lest anyone think I am just an insensitive prick) that I lucked out with the home but have had to bear the consequences of my own stupidity many times in my own life-yeah, it WAS harder than hell and felt hopeless at times, but I always persevered and emerged better than ever from each “crisis”, and no one bailed me out.
Why should I be required (via governmnet intervention) to bail out those who are irresponsible/lack financial savvy when their distress is a result of nothing more than their own bad decisions (regardless of motivation). I made GOOD decisions and am reaping the rewards-if you made BAD decisions: screw you, you are on your own-its not my duty to sacrifice my prosperity (EARNED via hard work, smart decisions, and learning from stupid decisions) to bail you out of your self-generated misery-learn a lesson and do better next time. There is just a shocking level of functional illiteracy in the US when it comes to financial matters, but that’s not the problem of those who ARE literate (the vast majority of homeowners).
@cmdr.sass: newsflash: we already are footing the bill whether we like it or not. as i mentioned, inflation is rising and so are credit card rates, even for folks who are paying on time. i’m not saying i’m happy about this, but i’m not OK with enduring “the greater depression” either.
i don’t think banks should be bailed out, but families being thrown out of their homes – yes, they should be given assistance.
people need to step back and think about the larger issues here. when city coffers dry up you’ll start seeing more and more pot holes, and shorter hours at the library, and no more summer recreation programs for your kiddies — there is a chain reaction to foreclosure and something has to be done.
Banks are there to make money. They failed.
You don’t lend money large sums of money without doing research into the person borrowing it. Even then you try and secure the sum to an asset.
Banks gave away large sums of money to people without checking. Business should sometimes fail. If a bank loaned out to much money and the collateral is now worthless they should go out of business.
The government should not subsidize business failure. Banks were stupid and should suffer. The country will take a hit but would recover in time.
If the government wanted to do something 5 years ago was the time.
My problem is that our stupid governor raised property taxes (as well as sales tax) and since I bought my house 16 months ago the monthly payment has gone up almost $200. It is a fixed rate, the increase is due to the damned property taxes. The payment was affordable when I bought it, but with everything going up I’m having a difficult time of it. I bought a house I could afford, my government took it out of my price range after I bought it, by more than doubling my property taxes
@friendlynerd: Yes, I wonder about those too. How much crack does someone need to smoke to believe that you can get a 500k mortgage for 4.5% / $800 / month and think that it’s a valid offer?
@deadlizard: Exactly what I was thinking. I used to be a financial aid counselor at a major(ly expensive) university (ahemFightOn!ahem), and one of the questions we routinely heard was whether it was better to refi/tap into the equity of a home rather than take the Stafford/Perkins/PLUS loans. At the time, some people could get a lower interest rate on those loans than they could on the school loans (or so they thought). My usual reply was that I couldn’t give them that kind of financial advice, only that if I were in that situation, I would be concerned about using my home as collateral. For example, in the unfortunate case I could no longer pay the loan back (job loss, incapacitation, death, etc.), if done with a refi/HELOC, they’ll take your house. If you have a student/parent loan (unsecured), you’ll have debt collectors hounding you, and you won’t be able to borrow again, but they won’t take your house. This guy is evidence that something “bad” doesn’t necessarily have to happen, and exemplifies exactly why you shouldn’t tap into the equity of your home for educational purposes. I bet he never talked with anyone at his daughter’s school’s financial aid office.
When I was young I remember that a “starter house” was not a 4 bedroom / 3 bath McMansion in the burbs. Also, when I was young, I recall that interest rates were around 9% as well.
So if you as a consumer can’t handle the 4th grade reading level required to read the mortgage contract and can’t do the 3rd grade math required to figure out how much a big interest rate jump is going to cost you in 3 years, then you should lose your house and go back to elementary school for a refresher.
I am tired of people surrendering their personal responsibility and then whining about the consequences. Just because a loan is available to you doesn’t mean you have to sign on the dotted line.
No. If you couldn’t work anymore, or you had to take a pay cut, or had to relocate, or some other thing like that, he would be a victim of circumstance. He is not a victim of anything.
He was intelligent, informed, and decided to gamble. Does that higher market value mean anything if you aren’t selling? Not really. That money that can borrowed out of it doesn’t just *poof* into existence (that’s the Fed’s job). They expect to make what you get out back at a profit.
$740k from $275k?! I hope their daughter learns from all this.
Gotta love denial. Wouldn’t they have all had more money and better credit by now if they had gotten the house fixed, or refinanced it to fixed, and left it well enough alone at a lower value? Or, like, let her go to a cheaper college.
Ms. Harris appears to have sense, but be stuck. If the article is portraying her remotely accurately, she seems like the kind of borrower they’ll really want to work with. Mr. Doyle, OTOH, dug himself into a hole, knowing he had a finite but unpredictable window to get climb out, and didn’t. Boo hoo.
@deadlizard: I agree, he bought his home for 250K in 1995–now the loan is 740K. What did he do with nearly 500K? College is expensive, but it’s not that expensive. Plus, he only mentions paying college for 1 child.
Oh, he said that he invested the money in businesses that went bankrupt. Huh?
The mortgage itself is only half of the problem. What about bonds that are underwritten and backed by those mortgages? This was illegal after the Great Depression but recently made legal again. All of those bonds are now underfunded because the property isn’t worth anything near what it was at the time the bonds were sold.
Pity Poor Joe who didn’t know the bond fund he put his 401K into is also tanked and he never came near a sub-prime mortgage or lived beyond his means. This is real and it sucks.
I just finished paying for my first home, so I’m not really concerned with foreclosure issues. What I’m afraid is that the Japanese had this same problem almost 15 years ago, and they are just breaking even today.
The worst part is that the gov is doing the exact same thing the japanese did, and they had a 10 year problem. Just to be sure I changed about a third of my investments out of the country and into Euro. Heres to hope this doesnt come bite me in the ass tomorrow.
Best part comes at the end:
“Until their most recent loan they never had a problem making their payments. They invested much of the money in shares of companies that subsequently went bankrupt.”
@hi: Except it isn’t just in the fine print. Mortgage Lenders have been required to provide a separate notice regarding Variable Rate Loans for several years now. The notice includes an example of what could happen to payments if the rate goes up during the term, and also includes a chart showing what the rate has done historically, and how that would affect payments. The borrower has to sign this form at closing. It’s not in fine print anywhere. It’s in plain black and white! Anyone complaining that “they didn’t know” when signing for a Variable Rate loan is either too lazy to read the documents they sign, or illiterate.
In either case it doesn’t help the situation when people automatically come to their defense and blame the bank when this happens. It just empowers those folks to continue to make bad decisions, since it’s “not their fault” anyway. Banks are already being punished significantly, in the form of financial losses, for their poor lending decisions. There’s no reason to pile on and blame them for the consumers poor choices too.
@rioja951: None of us want to see this stretch out over a 10-15 year period. What would you suggest the government should do to change the situation? I personally don’t think that in the semi-free market society we live in there is much they can do. It would be interesting to hear suggestions though on steps they could take to accelerate this.
@hi: That is bull crap, the reason these people didnt know better is because they didnt act like adults and read the loan docs make sure they understand them and review their own finances to make sure they could afford the max interest that the loan could be at.
I guess you have never heard about financial responsibility. Its not the banks job to budget the borrowers finances. The borrower is fully at fault for signing at the dotted line without doing the research that needs to be done.
Sorry man but buying a house isn’t like picking up a burger at a fast food joint but that is how people treated it.
They didn’t know they couldn’t afford it that is the biggest crock of crap I ever heard.
Come one people live your own lives, read the crap you are signing.
HI your mentality of the banks are at fault is the same mentality of explaining to a police officer that stealing that candy bar wasn’t your fault, it was the stores because they made it available.
Maybe the loan officer should have read the loan docs to the borrowers after they tucked them into bed, would that be about how you think things should be?
.
.
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“Considering the fact that banks do background checks and check to see if a person can afford a loan before approving a loan…how are they not responsible?”
Have you heard of the term Undocumented income, not everyone works at a full time job. Some people are self employed and don’t get W-2, also people can lie have you heard of fraud? Besides that still doesn’t let people off the hook when it comes down to it its their own responsibility to make the right financial decision, not to just sign the docs without reading them
Also the not understanding the docs crap is a load of shit too, if you cant understand the legal jargon hire an attny to explain it for you. Docs are Legal documents not cat in the hat books.
If people cant afford an attny then they have no damn business getting a home loan.
Not everyone walks into an ARM blind. I was well aware of how it worked, but signing up for the 5/1, interest only option got me a much better rate because the banks were betting that rates would go up. So, I’ve made payments as if I had a 30 year fixed and reduced the principle. Still have two years to go before a reset but rates are actually down below my current mortgage. Maybe there’s a bit of luck to it too.
An ARM can be a good tool if used properly but like every financial product, they’re not for everyone.
The meltdown is also hurting people who are trying to sell their homes. I had to relocate in order to find a new job. In doing so I put my house on the market, 10 months later it still has not sold. Because of the builders who have a surplus of new homes and can afford to sell them cheap, the lenders not giving anyone else loans, and the high amount of foreclosures, my house isn’t worth anything. I am having to price my house so low, I have to spend over $10,000 of my own money if and when it sales. My savings are gone, from paying both rent in the state I moved to, and my house payment, that I don’t even have enough money to sell my home. So not everyone in this situation is someone who got a loan on a house they couldn’t afford, there are some of us who are caught in the shrapnel.
@darkened: PMI covers the lender, not the borrower. The borrower doesn’t choose it. It’s a requirement placed by the loan investor based on loan-to-value ratio.
@qgriffith: If the government wants to help people, it should be helping people in your situation not the banks and borrowers who acted irresponsibly.
Seems to be a lot of self righteous (self proclaimed fiscally responsible)asshats here that should consider some compassion towards others.
If they ever find themselves in a position financially perhaps they can vote themselves off the island or just kill themselves. Make sure you have burial insurance though so we don’t get stuck footing the bill.
It’s real. It’s happening. See it for what it is or keep your head buried in the sand.
People who have financial problems run the gamut from deadbeats to those in the wrong place at the wrong time.
In reality where can you find a house etc. that isn’t 10X your income? Probably not where I live and work.
The US is one of the very few countries where one can get a mortgage that is fixed rate for 30 years. Given the really low rates over the last few years, it has been an F’n gift to consumers – anyone who didn’t take advantage of this either has the liquidity to take a risk or is retarded. Sure the banks and brokers lent more than they should have, and as far as I am concerned their losses are well deserved, but the consumers were also glutoneous and unthinking. When I went to buy my place I spoke with a real bank and they told me how much I could borrow – I almost vommited onto my desk, there was no way that I wanted so much of my after-tax income going to my mortgage. I guess it was theoretically manageable, but it would have meand that almost all my savings was via my home. Bad idea to invest it all in one place.
I have no doubt there are some real hard-luck stories out there, but I guess the NYT was too lazy to find one, because this so-called engineer clearly could not do grade 10 math. I guess he was also historically ignorant too, since NO boom/bubble has ever lasted forever – be it tulips, beaver pelts, railroads, tech stocks or real estate. Well, the last admin had the tech bust, and this one has the housing bust – seems like the public does not understand that what goes up will eventually come down, at least for a while.
Someone correct me if I’m thinking wrong. But these banks are already making money on the mortgages they have given out to the people who are paying for their houses. And they’re bumping them all up to interest rates they can’t afford because of greed.
1. The home owners are already paying for their houses.
2. The banks are making money off them.
So now the banks raise all their rates to amounts they can’t pay and:
1. The homeowners can’t afford to pay their mortgages anymore and forclose.
2. The banks take huge losses on the houses.
The homeonwers are not homeowners anymore, the banks loose lots of money.
Isn’t it more prudent for the banks to just stick to the low rates the homeowners are already paying, that way they don’t loose their houses, and at the same time the banks aren’t looseing tens of billions of dollars are deals that are going bad. True, they will make less money on lower interest rates, but they won’t be loosing money, and they still will be turning a profit.
Doesn’t that make sense? Geez.
@Quintus: Banks are not “raising rates’, they are following the terms of the docs that the borrowers signed and agreed to, Docs specify the max interest rate that the mortgage can be raised to. Those interest rates are determined by the fed base interest plus what ever % is in the terms(I am not sure about this but the % raises are set to guidelines)
You are correct that the homeowners cant afford the pmts and end up in foreclosure
You are correct that the banks/investors take huge losses.
A foreclosure can cost above $25k to complete, then when the property becomes REO there are cost associated with upkeep, utilities, winterization fees, taxes, insurance ect)
QUINTUS so what you are proposing is that the Mortgage companies reward these irresponsible borrowers with a fixed intro rate that is below a prime rate for not being responsible enough to make sure they read the docs and could afford the increase pmts. After all they knew the loan was a ARM that would reset to a higher interest.
What about the prime borrowers that are not late worked hard for their credit rating they basically get screwed.
I am not against helping these people but not thru a bailout where tax $ is used. I am against a rate freeze for the life of the loan, a temp freeze for another two years is okay but for the sole purpose of either selling the prop or reefing into a fixed rate.
You cant have no consequences for irresponsible financial decisions. People need to do their homework and work to get that house and make sure they have looked at all angles of cost and if they can afford it.
I see where you’re coming from. I actually had a couple of friends trying to get me into the houseing market back in 2000-01 when the prices were high, and the lender was trying to get me to take a loan way above my salary rate. I stood back and thought, these prices are bloated, and I’m definitly not going to take on a loan I know I can’t afford, and I was not going to go into an adjustable loan, I wanted a fixed one. All in all I decided on my meger income that I make, and the houseing market prices, I couldn’t afford to buy one. And I was right, I’d probably be with a lot of others right now if I did. So yea, blame can be shared all the way around.
But still, these are people. The banks won’t loose the money, and the people can keep the homes, it just makes sense to me. Besides this doesn’t affect the ones forecloseing and the banks only. It affects the neighbors, as eyesores can cause houseing values to decrease futher, and hurts the community.
So looking at it and saying, ha, serves you right is just plain stupid, not to mention morally repugnant.
Anyway this is just the start, people think they’re in a panic now, just wait, I’ve a feeling things are going to get a lot worse in time, maybe not immediatly, but it will happen.
We have a long way to go till the housing market recovers, home prices are still too high.
I agree something needs to be done but not handouts, freezing the intro rate for a specified time period is a good thing but not for the life of the loan. No one will learn that way.
That will only encourage people to make the same bad decisions because they will know that the govt will step in and rescue them.